IN THE SUPREME COURT OF BRITISH COLUMBIA
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Citation: |
Y.L. v. G.L., |
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2018 BCSC 1571 |
Date: 20180913
Docket: E152716
Registry: Vancouver
Between:
Y.L.
Claimant
And
G.L.
Respondent
Before: Master Muir
Reasons for Judgment
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Counsel for the Claimant: |
J. Kang |
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Counsel for the Respondent: |
G.H. Myers |
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Place and Date of Hearing: |
Vancouver, B.C. August 14, 2018 |
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Place and Date of Judgment: |
Vancouver, B.C. September 13, 2018 |
[1] This is an application by the respondent wife, G.L., for the following orders:
a) An order that the claimant husband, Y.L., or the Court cancel the Certificate of Pending Litigation registered on September 28, 2015 under number BB3034786 (the “CPL”) against the former family residence located on Wilson Avenue, Burnaby, British Columbia (the “Wilson Avenue property”);
b) An order for sale of the Wilson Avenue property, and that the respondent receive all of the net proceeds of sale or, alternatively, a portion of the proceeds of sale sufficient to cover all of her outstanding and prospective legal fees and living expenses;
c) Alternatively, an order that the respondent receive an interim distribution of the family assets in the amount of $400,000;
d) In the further alternative, an order that the respondent receive an interim distribution of the family assets in the amount of $300,000; and
e) Costs of this application, including special costs.
[2] As a preliminary matter, the claimant sought an adjournment of this application as he objected to the service of affidavit #9 of the respondent, which was served on him on August 9, 2018 at 4:11 p.m. Alternatively, he submitted that the affidavit should not be admitted on this application.
[3] For responsive affidavits, Rules 10-6(12) and (13) of the Supreme Court Family Rules, B.C. Reg. 169/2009 provide:
(12) An applicant who wishes to respond to any document served under subrule (8) of this rule must file and serve on each application respondent any responding affidavits no later than 4 p.m. on the business day that is one full business day before the date set for the hearing.
(13) Unless all parties consent or the court otherwise orders, a party must not serve any affidavits additional to those served under subrules (6), (8) and (12).
[4] I note that although the hearing of the respondent’s application was originally set for April 11, 2018, it was then reset to June 28, 2018 and subsequently to August 14, 2018. Thus, affidavit #9 of the respondent served on the claimant on August 10, 2018 (after 4 p.m. on August 9, 2018) was in fact served in accordance with the rules and the claimant has no automatic right of reply to this affidavit.
[5] Regardless, the claimant objected to affidavit #9 of the respondent on the basis that the claimant served his response material back in April 2018 and, therefore, he submits he should have been given more time to consider any reply material from the respondent.
[6] The respondent objected to a further adjournment, pointing out that this application had already been adjourned twice.
[7] I concluded that affidavit #9 of the respondent should be admitted and her application should proceed. I did ask the claimant’s counsel to alert me to any material in the respondent’s affidavit #9 that was not properly responsive. There was no further objection.
[8] The respondent also sought to rely on an amended notice of application, which had not been filed but had been provided to counsel for the claimant, and to a further Form F8 financial statement of the respondent. The claimant took no objection to these documents.
[9] I direct, however, that if the amended notice of application has not been filed, it is to be filed forthwith, so that the full record that was before me is apparent.
[10] There has already been a lengthy (28-day) trial in this action in March 2017 dealing with custody, parenting, guardianship, residence and decision-making authority concerning the parties’ son. However, many issues remain to be resolved after that trial, including the validity of certain separation agreements as well as property and support issues. There is a further 30-day trial scheduled for October 2019.
[11] Mr. Justice Sigurdson, the trial judge, rendered his decision on July 13, 2017.
[12] In his reasons, Sigurdson J. goes into considerable detail on the history of the parties’ relationship, which I will not repeat here. I will set out only the basic facts necessary to these reasons.
[13] The claimant and the respondent are 64 and 49 years old respectively. They were born and raised in China.
[14] The parties met in 1999, and married on August 28, 2003 in Beijing. Their son was born on September 8, 2009. The parties separated in or about March of 2015.
[15] The respondent has a Bachelor’s Degree in telecommunications engineering and her past employment included a senior job with a major government agency from 1993 to 2006.
[16] The claimant has a degree in engineering and is a successful entrepreneur who founded the family company, a technology company that makes glass for the windows in many of the high-speed trains and subways in China and internationally (the “Technology Company”).
[17] During the relationship, the respondent held a position with the Technology Company where she worked as a cashier and administrative chief. She worked full-time until her son was born and then part-time until the family immigrated to Canada.
[18] The claimant was the Technology Company’s chief executive officer and held 90% of its shares. His adult daughter from a prior relationship held the remaining 10% of the Technology Company’s shares. The claimant sold 53% of his shares in 2013 and 2014, and used some of the funds to purchase properties and assets in Canada for the family’s immigration to Vancouver.
[19] The claimant became a landed immigrant in Canada in 2011, but the family continued to live in Beijing.
[20] In 2013, the claimant came to Vancouver and purchased the Wilson Avenue property. The respondent and the parties’ son then came to Vancouver and lived in the Wilson Avenue property and the claimant went back to Beijing.
[21] The child attended two daycares in Burnaby in 2013. The child exhibited serious behavioural issues.
[22] In late 2013 or early 2014, the parties purchased a house on West 34th Avenue in Vancouver (the “West 34th property”), intending to renovate the older house or to build a new house.
[23] The child was registered in a school in Burnaby in September 2014, but his behavioural issues continued.
[24] The claimant remained active in the Technology Company until 2014 when he moved to Canada permanently. He retains about 37% of the Technology Company shares. Although he is semi-retired, the claimant is chairman of the board of the Technology Company, provides consultation to the company, and receives annual dividends and other benefits from it.
[25] The parties’ relationship was not a happy one and, in March 2015, they separated and the respondent moved with the child to a rented townhouse near the University of British Columbia (“UBC”). The claimant remained in the Wilson Avenue property.
[26] In April 2015, the child was registered at Queen Mary School in Point Grey, Vancouver. He received assistance from a school support worker and a short-term intensive behavioural support worker, which helped with his behavioural issues. The parties agreed that the child would continue in this school in Grade 1.
[27] There were three separation agreements entered into between the parties in May 2015. The respondent says she entered into those agreements under duress and without legal advice or full financial disclosure and that they are blatantly unfair.
[28] The agreement of May 3, 2015, which apparently is the main separation agreement, allegedly provides that the respondent would receive:
a) A property in Beijing called the AnLi Property, the value of which is in dispute, but which was valued in 2015 at $3 million (all values are in Canadian dollars unless otherwise noted) and which she estimates presently has a value of approximately $5 million. The claimant says the AnLi property now has a value of $10 million to $14.5 million;
b) The rents from the AnLi property were to be used to pay the expenses and mortgage for the Wilson Avenue property and West 34th property for another year;
c) The Wilson Avenue property;
d) $140,000 of $840,000 cash; and
e) A Mercedes vehicle.
[29] The May 3, 2015 agreement allegedly provided that the claimant was to receive:
a) The West 34th property;
b) $700,000 of the $840,000 cash;
c) A Lexus vehicle; and
d) All other property.
[30] The other property that the claimant was to receive under the May 3, 2015 agreement included the Technology Company shares (argued to be worth more than $9 million), a house in Beijing worth about $8 million, approximately $1.5 million from the sale of another house in China that was sold in May 2015 without the respondent’s knowledge, and at least 3.43 million RMB in his Chinese account.
[31] The claimant had sold 25% of his Technology Company shares in 2013 for approximately $7.6 million. Approximately $2.7 million was transferred to be used in Canada and the balance allegedly retained by the claimant. He sold an additional 27% of his shares in 2014, those sale proceeds have not been disclosed by the claimant.
[32] The respondent receives the rent from the AnLi property, which, from her Form F8 financial statement of March 23, 2018, results in income to her of approximately $170,000 per annum.
[33] The parties obtained a divorce in China in May 2015. After the respondent’s return to Vancouver, she received legal advice that the separation agreements were unfair to her and she refused to complete her obligations under the agreements by transferring $200,000 and the title to the West 34th property to the claimant.
[34] The claimant alleges the respondent did not use the rent from the AnLi property to pay the expenses and mortgages for the Wilson Avenue and the West 34th properties as the separation agreement required.
[35] In June 2015, at the end of the school year, the claimant picked up the child from school and did not return the child to the respondent. The child was in the claimant’s care and rarely saw the respondent until after the decision of Sigurdson J. His lordship found that the change in permanent residence of the child was done without consultation with the respondent and was without her consent.
[36] In August 2015, the claimant moved from Burnaby to Abbotsford and the child was registered in Clearbrook School. Although apparently the child initially did relatively well there, serious behavioural issues again developed.
[37] The respondent returned to live in the Wilson Avenue property.
[38] The claimant commenced these proceedings in September 2015. He seeks to enforce the separation agreements and, in that context, claims an unequal distribution of matrimonial property. The respondent counterclaimed, disputing the validity of the separation agreements and claiming a reapportionment of the matrimonial property.
[39] On February 22, 2016, the parties consented to various orders at a judicial case conference heard before Madam Justice Loo (the “Loo Order”). Paragraph 9 of the Loo Order jointly restrained the parties from disposing of any properties or assets at issue inside or outside of British Columbia.
[40] The Loo Order provided at para. 10:
If a Party must dispose of a property or asset at issue in the proceeding in order to provide money for ordinary living expenses, that Party shall seek the consent of the other Party to the planned disposition and provide details in regard to the disposition including the reason for it, such consent not to be unreasonably withheld, failing which, the Party can shall [sic] seek a further Order of this Court to approve the planned disposition.
[41] On February 24, 2016, the claimant sought consent to sell the remaining Beijing house. The respondent consented to the sale, on condition that the sale proceeds were disclosed, that she be advised of the completion of the sale and be given a copy of the completed sale documents. I gather that although the sale was completed, the claimant did not advise the respondent of the sale details or give her copies of the sale documents despite many requests.
[42] The claimant commenced a matrimonial action in China in May 2016 (the “Chinese action”). In the Chinese action, the claimant sought to set aside the property division—opposite to the position he takes in this action. The respondent was required to retain counsel in China to represent her in this action.
[43] In August 2016, in hopeful anticipation that she would be successful in obtaining primary residence of the child at the upcoming trial in Vancouver, the respondent sought consent of the strata council of the Wilson Avenue property to rent out that property so that she could relocate with the child to the UBC area. That was rejected.
[44] The respondent then asked the claimant to consent to her sale of the Wilson Avenue property. The claimant refused.
[45] The child was finally assessed at Sunny Hill Health Centre in March 2017 and was diagnosed with autism spectrum disorder.
[46] Justice Sigurdson concluded that the parties should have joint custody and joint guardianship and that the child should be primarily resident with the respondent commencing August 1, 2017. He ordered that the child live with the respondent during the week and the claimant on most weekends. Each party was to have decision-making authority when the child was in their care, and the parties were to discuss major decisions regarding the child but the respondent was to have the final say in the event of an impasse.
[47] In addition, Sigurdson J. ordered that the respondent was to decide where the child would attend school for the 2017/2018 year.
[48] As a result, the respondent again rented in the UBC area. She decided to do so because she felt the resources in that area were better for the child. She rented a townhouse, rather than a condo like the Wilson Avenue property, as she says it is safer given the child’s propensity to throw things out of windows.
[49] She again sought permission from the strata council of the Wilson Avenue property to rent out that property and, again, she was denied.
[50] The respondent met with school board representatives regarding choosing a school for the child and they apparently suggested University Hill Elementary and the child has been registered there since September 2017. The school apparently receives funding from the Autism Society of British Columbia and has hired a special teaching assistant for the child. It is said that he is progressing well.
[51] The trial in the Chinese action was held on September 14, 2017 and judgement was reserved. On November 30, 2017, before a decision in the Chinese action, the claimant was allowed to withdraw his claim, allegedly on the basis that the parties would negotiate a settlement. No such negotiations have occurred.
[52] On December 3, 2017, the claimant filed a police report with the Beijing authorities alleging that the respondent had engaged in embezzlement and forgery in her dealings with the Technology Company. Those allegations apparently also were raised in the Chinese action and the respondent says that her Chinese counsel has responded to them fully.
[53] The respondent completely denies the allegations, and says that her actions were at all times at the direction of the claimant and were largely done to avoid tax. She points out that her authority to pay funds on behalf of the Technology Company was limited, that the claimant had complete authority to do so, and that any funds she had responsibility for either went to the claimant, were paid at his direction, or were returned to the company.
[54] The respondent says that the audit report that the claimant relies upon in support of his allegations of embezzlement and forgery does not come to either of those conclusions, nor does it conclude anything illegal transpired. It simply notes transactions that are not completely documented.
[55] The respondent says that she has had her Chinese lawyer contact the Beijing authorities and offer to provide them any assistance they require. Her evidence is that she is not aware of any ongoing investigation, any charges against her, or any danger of her being detained by the Chinese authorities.
[56] I note, as well, that although Sigurdson J. awarded the respondent costs and her bill of costs is in excess of $100,000, that matter is still before the courts well over a year after the order was made.
[57] The respondent has incurred over $220,000 in legal fees here and in China. She says that she is in arrears of more than $75,000.
[58] The respondent is facing another 30-day trial with the claimant with respect to this action. It is fair to say that the claimant is very litigious. The respondent estimates that she is facing at least another $250,000 of legal fees.
[59] Despite the fact that she has a good income from the AnLi property, the respondent’s expenses are high, including supporting the Wilson Avenue property, renting the townhouse in the UBC area, as well as paying for her own and the child’s expenses. She estimates her annual expenses, not including legal fees, to be in excess of $165,000.
[60] I gather the claimant has yet to pay any child support.
[61] As noted, the respondent has tried to rent out the Wilson Avenue property but has not been able to get consent of the strata council. She has asked the claimant for his consent to her sale of that property and he has refused.
[62] The respondent says that she has run out of financial options and that she is incurring debt. She says she needs financial assistance or she will not be able to afford to defend this family law action and press her counterclaim. She, thus, seeks an order for sale of the Wilson Avenue property and an interim distribution of funds from the sale.
[63] The respondent submits that selling the Wilson Avenue property will not prejudice the claimant, as even if the separation agreements are upheld, she is entitled to retain title to that property.
[64] The claimant says that the respondent has not shown that an interim distribution is necessary, as she is receiving sufficient income from AnLi. He further says that if the respondent reduced her expenses by moving back into the Wilson Avenue property, there would be no need for this application.
[65] The claimant alleges that to allow the sale of the Wilson Avenue property would prejudice him. He says that if the May 3, 2015 agreement is upheld, the respondent will owe him the $200,000 she has not paid and likely costs as well. She would have no assets in this jurisdiction from which the claimant could hope to recoup those amounts.
[66] The claimant says that if the application is made under s. 89 of the Family Law Act, S.B.C. 2011, c. 25 [FLA], it must be shown to be necessary and not be to his prejudice. He submits the respondent, thus, has not met this onus.
[67] In addition, the claimant says that his position with the Technology Company and the income he received from it have been negatively impacted by certain actions of the respondent. He alleges that the respondent has told the other shareholders that she will soon have half of the claimant’s shares and will sell them to the other shareholders cheaply. He says this has resulted in his dividends being dramatically reduced and in the other shareholders defrauding the company.
[68] This is on top of the allegations the claimant makes of the respondent embezzling $6.8 million from the Technology Company and failing to pay proper taxes for the Technology Company, allegedly resulting in him having to pay $1 million in tax personally.
[69] The claimant takes the position that this application is premature. He argues that the respondent should return to Beijing and turn herself over to the authorities there to face these allegations. He submits that that will not cost her anything and will straighten out much of what is in issue in this action.
[70] Further, the claimant takes the position that the respondent’s application is wrong in law. He submits that as the application is for legal fees, not for living expenses, it is necessarily an application to vary the Loo Order. He argues, however, that there has been no change in circumstances that would warrant such a variation.
[71] He also submits that an order for sale of the Wilson Avenue property would have to be made pursuant to Rule 15-8(1) of the Supreme Court Family Rules, B.C. Reg. 169/2009 [“SCFR”], which provides:
(1) If in a family law case it appears necessary or expedient that property be sold, the court may order the sale and may order a person in possession of the property or in receipt of the rents, profits or income from it to join in the sale and transfer of the property and deliver up the possession or receipt to the purchaser or person designated by the court.
[72] The claimant submits that it is neither necessary nor expedient to sell the Wilson Avenue property. As noted, he suggests that the respondent should simply move back into the Wilson Avenue property.
[73] Finally, the claimant submits that the CPL registered against title to the Wilson Avenue property can only be cancelled in accordance with the provisions of ss. 256 and 257 of the Land Title Act, R.S.B.C. 1996, c. 250 [LTA] and that the respondent has not met the onus of showing undue hardship, nor has she offered anything in the way of the security required by s. 257.
[74] The claimant says the respondent should not bring this application until after she has returned to China to deal with the criminal allegations that he has made there. He says that that would assist in clarifying issues that must be determined in this action.
[75] The respondent says she has answered those allegations and there are no criminal proceedings ongoing in China to her knowledge.
[76] I note that the issues the claimant raises on this application relating to the Technology Company are not raised in this action. Most, if not all, of the allegations would properly be brought by the Technology Company in proceedings in China, or by the claimant against the company, again in China.
[77] The respondent has significant assets in China. If the claimant is correct, the value of the respondent’s property in China is $10 million to $14.5 million. There appears to be ample security in that property for any action in China.
[78] In coming to the conclusion that these allegations have no bearing on the application before me, I am cognizant of the comments on the claimant’s credibility that were made by Sigurdson J.:
[136] Mr. L., although a successful scientist and businessperson and a very intelligent man, occasionally gave evidence that I found to be implausible.
[137] Mr. L. would occasionally make assertions that he presumably thought would influence the Court’s assessment of Ms. L.’s character … I do not think that Mr. L. really believed these assertions or suppositions that he made or hinted at but was trying them out to see if they might somehow diminish the Court’s view of the respondent’s capability or character.
[79] Here, of course, I make no finding as to whether the respondent defrauded the Technology Company. However, it is curious to me that the claimant made this such a significant basis of his argument when it is largely irrelevant to the issues before me.
[80] As a result, my conclusion is that the application is timely.
[81] As noted, the parties consented to an order restraining the disposition of family assets. The provision granting leave to apply was only regarding living expenses. Although the respondent does seek an interim distribution to assist with living expenses, it is clear that the primary problem here is funding the ongoing litigation.
[82] The Loo Order is an interim order made under the FLA. Such orders can be varied in accordance with s. 216(3) of the FLA, which provides:
216 (1) Subject to this Act, if an application is made for an order under this Act, a court may make an interim order for the relief applied for.
(2) In making an interim order respecting a family law dispute, the court, to the extent practicable, must make the interim order in accordance with any requirements or conditions of this Act that would apply if the order were not an interim order.
(3) On application by a party, a court may change, suspend or terminate an interim order made under subsection (1) if satisfied that at least one of the following circumstances exists:
(a) a change in circumstances has occurred since the interim order was made;
(b) evidence of a substantial nature that was not available at the time the interim order was made has become available.
(4) In making an order under subsection (3), the court must take into account all of the following:
(a) the change in circumstances or the evidence, or both, referred to in subsection (3);
(b) the length of time that has passed since the interim order was made;
(c) whether the interim order was made for the purpose of having a temporary arrangement in place, with the intention that the arrangement
(i) would not adversely affect the position of either party during negotiations, during family dispute resolution or at trial, and
(ii) would not necessarily reflect the final arrangement between the parties;
(d) whether a trial has been scheduled;
(e) any potential adverse effect, on a party or a child of a party, of either making or declining to make an order under subsection (3).
[83] The claimant submits there has not been a change in circumstances that would allow a variation of the Loo Order. I disagree.
[84] There has been a 28-day trial since the Loo Order. As a result, the respondent has incurred significant debt and has taken on primary responsibility for the parties’ child with no child support from the claimant. She has moved to a more expensive accommodation out of consideration for the child’s needs. Those changes, in my view, amount to a material change in circumstances such that the respondent can seek a variation of the Loo Order.
[85] The respondent has already been required to deal with a 28-day trial to resolve issues of custody, parenting, guardianship, residence and decision-making authority concerning the parties’ son.
[86] The cost of getting through that trial and dealing with the cost of the Chinese action was over $220,000. I note that the claimant abandoned the Chinese action after trial, apparently preferring to lodge a criminal complaint about the respondent with the Chinese authorities. Thus, the respondent may well have continuing legal expenses in China dealing with the criminal allegations or other actions that the claimant may instigate.
[87] Although the respondent is earning a good amount of money from the AnLi property, her expenses to support herself and the child are high. The claimant is not paying child support.
[88] The respondent is, according to her March 2018 Form F8 financial statement, carrying $110,439.89 in unsecured debt, consisting of loans, credit card debt, and $76,740.44 in outstanding legal fees. She has no significant liquid assets.
[89] The respondent’s claim is quite significant, alleging a reapportionment of family assets said to total in excess of $30 million.
[90] The upcoming trial is scheduled for 30 days. The matter is complex. There are businesses and properties in China and properties here. Allegations of dishonesty will undoubtedly surface during the trial that will have to be defended against. Experts will be required.
[91] I do not agree that the respondent should simply move back into the Wilson Avenue property. As noted earlier, after the 28-day trial, Sigurdson J. determined that the respondent should have the final say in matters regarding the child. Her evidence is that the child’s special needs were not being met in the school in Burnaby, but are being met with the additional resources available in the UBC area. There is no basis in the evidence to dispute that.
[92] Thus, I conclude that the respondent’s decision to relocate to the UBC area was reasonable and was done out of consideration for the best interests of the child. Returning to the Wilson Avenue property is not an acceptable solution in the circumstances. Nor do I conclude that doing so would resolve the financial issues the respondent is facing in this litigation.
[93] Looking at the respondent’s financial means, it is clear that she has already gone into considerable debt to fund this litigation. She is facing another 30-day trial in 2019 and despite her income, I conclude that she is unable to fund that litigation as things stand.
[94] The respondent was clearly in quite different circumstances before the first trial. At that time, she did not have primary residence of the parties’ child and was living in the Wilson Avenue property. Even so, she incurred substantial debt. She now has the child’s expenses as well as her own. They are living in rented premises in the UBC area and her annual expenses eat up by far the majority of her income.
[95] The application is made under s. 89 of the FLA, which provides:
Orders for interim distribution of property
89 If satisfied that it would not be harmful to the interests of a spouse and is necessary for a purpose listed below, the Supreme Court may make an order for an interim distribution of family property that is at issue under this Part to provide money to fund
(a) family dispute resolution,
(b) all or part of a proceeding under this Act, or
(c) the obtaining of information or evidence in support of family dispute resolution or an application to a court.
[96] The parties referred to several decisions on interim distributions. For these purposes, I need only refer to the decision of Justice Ballance in I.F. v. R.J.R., 2015 BCSC 793, which reviews and captures the essential principles. Ballance J. also considered the impact of an alleged agreement on the making of an order for an interim distribution:
[190] In none of the cases yet decided of which I have been made aware has the court confronted the thorny question of the impact of a marriage agreement that, if enforceable, would preclude the applicant spouse from the division of family property.
[191] The provision itself does not bar the making of an interim order where there is an existing agreement concerning property division. I can conceive of no principled basis to read such a limitation into s. 89 or to otherwise consider the existence of such an agreement as an absolute bar to relief.
[97] Justice Ballance also considered the rationale for and application of s. 89:
[192] The blunt purpose of s. 89 is to assist economically disadvantaged spouses to access justice in matrimonial disputes; it is meant to help level the litigation playing field that is so often skewed when one spouse controls all or the majority of the wealth and assets. Application of s. 89 calls for a purposive interpretation, where the need of the applicant spouse to receive an interim distribution and the potential entailing harm to the other spouse are evaluated contextually with an eye on the larger objectives endorsed by the FLA.
[193] In my opinion, the plain meaning of the phrase “harmful to the interests of the spouse” in s. 89 contemplates actual or potential economic harm, and is likely broad in its scope. Determination of the presence of harm requires the court to reasonably anticipate and then assess the consequences that may flow from the interim order being sought. That approach, in turn, invites a highly individualized component to the inquiry. For example, would the distribution being sought in the particular case require a sale of property or of the encumbering of assets; what income tax ramifications might be triggered and what other transactional costs would arise? The concept of harm under s. 89 would also encompass economic implications such as whether the distribution would adversely impact the other spouse’s lifestyle or effectively undermine or prejudice his or her argument for reapportionment.
[194] In cases where the applicant may be precluded from entitlement to the family property based on a pre-existing agreement, the notion of being harmful to the other spouse’s interests could also take the form of the court permitting a distribution so as to enable the funding of an unmeritorious claim. A reasonable way to attenuate that manifestation of harm is to require the applicant to show there is a reasonable prospect of success of impeaching the subject agreement. The claimant in the case at hand has satisfied that hurdle.
…
[196] In terms of a harmful consequence to the respondent’s interests, the main concern is that the claimant would be unable to repay the amount distributed to her if the marriage agreement stands. Evaluating the claimant’s ability to repay has caused me pause. This is because if it is ultimately determined that the marriage agreement precludes her from spousal support as well as the division of assets, she may have to repay support as well as any distribution ordered. The aggregate amount could be considerable and may take several years for the claimant to repay.
[197] Adoption of a strict interpretation of “harmful” could mean that the applicant must be in a position to repay the distributed funds more or less immediately upon the failure of his or her claim to impeach the pre-existing agreement at trial. Were the court to endorse that formulation, then it would follow that a distribution might only be sanctioned where the applicant has assets equal or greater to the amount of the distribution, or a corresponding borrowing power or an assured minimum entitlement to family property so the court could be confident of repayment. Such an interpretation would place the most economically disadvantaged spouses beyond the reach of s. 89 and is not harmonious with a purposive approach.
[198] In my view, the concept of being harmful to the financial interests of the spouse in terms of the recipients spouse’s capacity to repay, must mean harm of an enduring nature. Accordingly, the fact that the recipient spouse may only be able to repay the distribution over a reasonable period of time into the future, as opposed to immediately following an unfavourable outcome at trial, would not, of itself, qualify as being harmful to the other spouse’s interests.
[98] I have concluded that, without an interim distribution, it is likely that the respondent will not be able to fund this litigation.
[99] Given the alleged power imbalance between the parties, the alleged lack of independent legal advice for the respondent, and the apparent disparity in the quantum of family assets allocated to each party under the alleged agreements, I am satisfied that the respondent’s claim is meritorious.
[100] As the respondent is entitled to the Wilson Avenue property under the alleged separation agreements, and argues that she would be entitled to a substantially greater amount of family assets if the separation agreements are set aside, I am satisfied there is no chance of harm to the claimant if an interim distribution is allowed.
[101] I will deal with the question of the respondent’s ability to repay the $200,000 said to still be owing under the alleged May 3, 2015 separation agreement later in these reasons, however, I am satisfied that that is not a bar to the order sought.
[102] I conclude that the respondent is entitled to an interim distribution pursuant to s. 89 of the FLA in order to fund this proceeding.
[103] Looking at the evidence, I conclude that the upcoming trial and preparation necessary could easily cost the respondent $150,000 to $200,000 in legal fees. She is also in arrears for legal fees of $76,740.44.
[104] I conclude that an interim distribution to the respondent of $250,000 is warranted.
[105] My conclusion that the respondent requires an interim distribution to fund this litigation leads to the inevitable question of where that money will come from.
[106] Rule 15-8(1) of the SCFR, allows for sales of matrimonial property:
(1) If in a family law case it appears necessary or expedient that property be sold, the court may order the sale and may order a person in possession of the property or in receipt of the rents, profits or income from it to join in the sale and transfer of the property and deliver up the possession or receipt to the purchaser or person designated by the court.
[107] The parties referred me to decisions such as Reilly v. Reilly (1992), 99 D.L.R. (4th) 47 (B.C.C.A.) for the general principles applicable.
[108] The claimant argues that the sale of the Wilson Avenue property is not necessary. He repeats his arguments that the respondent is making ample income, that she should first go to China and deal with the criminal allegations, and that she has undervalued the AnLi property. He adds that she likely has a large amount of undisclosed assets—being the fruits of her fraudulent activities with the Technology Company. He also points out that the respondent has been awarded costs by Sigurdson J. and, while not resolved, the respondent presents those costs at over $100,000.
[109] I have dealt earlier with the suggestion that the respondent has ample income and that her application is premature.
[110] As to the AnLi property, it is also a family asset and it would arguably be more prejudicial to allow that to be sold or encumbered, as it is available as security for the alleged wrongdoing in China and is presently the source of the respondent’s only income.
[111] As I have seen no convincing evidence that the respondent was involved in illicit activities regarding the Technology Company, I am not prepared to consider the claimant’s bald allegations as proof that the respondent has undisclosed assets.
[112] As to the respondent’s entitlement to costs, there are issues that have prevented the finalization of the costs award. Whether those issues will be resolved, the costs assessed and paid before the trial of the balance of the issues in this matter is, in my view, questionable.
[113] The obvious conclusion is that it will be necessary to sell the Wilson Avenue property.
[114] I have been advised that there is likely $400,000 in equity in the Wilson Avenue property.
[115] I, therefore, grant an order for the sale of the Wilson Avenue property. The respondent will have sole conduct of sale. From the proceeds, after payment of the normal fees, costs and encumbrances, the respondent is to be paid $250,000 as an interim distribution of property.
[116] The balance of the sale proceeds is to be held in trust by the respondent’s counsel pending agreement or further order.
[117] It is my view that the power to order the interim sale of property must include the power to order the claimant to remove his CPL from the title.
[118] In case I am wrong, however, I consider that the provisions of ss. 256(1) and 257 of the LTA allow an order that the CPL be cancelled. Those sections provide:
256 (1) A person who is the registered owner of or claims to be entitled to an estate or interest in land against which a certificate of pending litigation has been registered may, on setting out in an affidavit
(a) particulars of the registration of the certificate of pending litigation,
(b) that hardship and inconvenience are experienced or are likely to be experienced by the registration, and
(c) the grounds for those statements,
apply for an order that the registration of the certificate be cancelled.
257 (1) On the hearing of the application referred to in section 256 (1), the court
(a) may order the cancellation of the registration of the certificate of pending litigation either in whole or in part, on
(i) being satisfied that an order requiring security to be given is proper in the circumstances and that damages will provide adequate relief to the party in whose name the certificate of pending litigation has been registered, and
(ii) the applicant giving to the party the security so ordered in an amount satisfactory to the court, or
(b) may refuse to order the cancellation of the registration, and in that case may order the party
(i) to enter into an undertaking to abide by any order that the court may make as to damages properly payable to the owner as a result of the registration of the certificate of pending litigation, and
(ii) to give security in an amount satisfactory to the court and conditioned on the fulfilment of the undertaking and compliance with further terms and conditions, if any, the court may consider proper.
(2) The form of the undertaking must be settled by the registrar of the court.
(3) In setting the amount of the security to be given, the court may take into consideration the probability of the party’s success in the action in respect of which the certificate of pending litigation was registered.
[119] The question of hardship was considered by the Court of Appeal in Liquor Barn Income Fund v. Becker, 2011 BCCA 141 at para. 37:
[37] The plain language of s. 256(1)(b) requires that evidence of the applicant’s hardship and inconvenience must be “experienced or likely to be experienced by the registration” [emphasis added]. This language imports a requirement that the hardship and inconvenience experienced or likely to be experienced by the applicant must be causally connected solely to the registration of the CPLs. Evidence of hardship must be more than general allegations of inconvenience but include particulars that demonstrate real hardship: Thonger v. Palmer, [1988] B.C.J. No. 1474 (B.C.S.C.); Aviawest Resorts Inc. v. Memory Lane Developments Inc., 2004 BCSC 999, 22 R.P.R. (4th) 255; and Burns v. Kuhn, 2008 BCSC 1767.
[120] Given my findings regarding the need to sell the Wilson Avenue property, it is clear that the continued existence of the CPL on title will create hardship in that it may hamper the respondent’s ability to sell the property.
[121] The evidence that I have shows that there is likely to be close to $150,000 in equity after the sale of the Wilson Avenue property, the payment of proper disbursements and the interim distribution to the respondent of $250,000.
[122] The claimant submits that he is owed $200,000 and may be awarded costs at the upcoming trial. Referring back to paras. 196 to 198 of the decision of Ballance J. in I.F. set out above, I conclude that any amount owing to the claimant by the respondent at the end of the day that is not covered by this security will be recoverable from the income being earned by the respondent from the AnLi property within a reasonable period of time.
[123] I am satisfied that security is appropriate and that damages will provide adequate relief to the claimant should he be successful. I am of the view that the balance of the sale proceeds from the Wilson Avenue property remaining in trust, in accordance with the terms of my order for sale of that property, will provide adequate security for the removal of the CPL.
[124] I, therefore, order that the registration of the claimant’s CPL be cancelled.
[125] The Loo Order is varied to the extent required to allow the sale of the Wilson Avenue property and the interim payment of $250,000 to the respondent as set out above. The registration of the claimant’s CPL on the Wilson Avenue property is cancelled.
[126] The respondent sought special costs of this application. The application was not straightforward. While the equities may have tilted largely in favour of the respondent, the orders sought were, nevertheless, extraordinary remedies. In all of the circumstances, I am satisfied that the normal rule should apply.
[127] The respondent will have her costs of this application in the cause.
“Master Muir”